How SBA 504 Loans Can Prevent Rate Hikes
Interest rate rises are generally considered to be a sign of a healthy and growing economy. They can be advantageous for your savings and other finances. However, if you are borrowing money, you can expect to pay more. For businesses, which may rely on loans, this can be a serious concern. Fortunately, SBA 504 loans may be the answer.
What Is a 504 Loan?
The Small Business Administration helps small businesses get loans by acting as a guarantor for a portion of the borrowed amount. This lets lenders offer businesses larger loans and better terms than they otherwise would. The 504 program is one of the few methods the SBA has for backing loans.
Small businesses tend to like 504 loans because they carry low-interest rates and require smaller down payments. These loans can be used for all sorts of business purposes.
- Real estate purchases
- Equipment financing
- Refinance conventional debt
These uses represent some of the most substantial investments for most small businesses. Therefore, it should be no surprise that this type of loan is very popular.
How Do 504 Loans Affect Interest Rates?
Loans under the SBA’s 504 program offer one other valuable feature: fixed rates. Not only is the interest rate below market value, but it also remains the same for the life of the loan. The terms of 504 loans are typically 25 years. So, that is a long time to maintain a strong interest rate.
In other words, if you lock in a good rate for your small business, you can keep paying that low rate even if interest rates rise more. That is great news for small businesses that may rely on that capital to help them manage their major expenses.
What Do You Need To Do To Get a 504 Loan?
SBA 504 loans require a lender that worked with the Small Business Administration. As mentioned above, they are a type of loan backed by the government. However, they are still provided and administered by lenders.
Find a lender that has experience offered loans under SBA programs. Many will offer prequalification to help you determine if you could use the loan for your business needs or not. Typically, you will need to provide tax returns and financial statements. You will likely need to provide documentation from your business and the owners.
With all of that together, you may be eligible to receive fixed-rate financing. It doesn’t take long to get prequalified, so apply today and find out.